After a year as challenging as 2020, with a pandemic and other economic stressors, many people turned to retail therapy as a way to soothe temporary frustrations. Or maybe you engaged in a trend that has been dubbed “guilt gifting”—sending more gifts than usual to people because you feel bad for them or what they’re going through.
With an increase in online shopping due to COVID-19, many people may find they over-shopped this holiday season. Financial experts recommend you don’t chastise yourself or feel too bad about it; instead, simply tackle it. In the wake of too much money going out, the new year is a great time to revisit and refresh your finances and figure out a recovery strategy to bring your finances back into balance. Here are five tips for coming back from overspending.
Face the Music
After the last traces of that holiday gift wrap is in the trash and the new year has dawned, your first step is to take an honest look at where you’re at financially. Gather all your statements from credit cards and shopping accounts or just add up the numbers from a checking account statement and determine: How much did you actually spend; how much of that is in the form of debt; how much money do you have coming in? When you know where you stand, it’s that much easier to get a handle on what to do next.
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Stop Spending and Cut Back
Sometimes, overspending becomes a habit. Maybe you’re used to packages coming in the mail every week or being able to click “add to cart” with the press of a key. But in order to truly recover from a holiday overspend, you may also need to cut back on expenditures you’ve gotten used to: extra streaming or subscription services, take-out, new makeup or electronics.
Set a New Budget
The New Year is the perfect time to reassess your old budget and set a fresh new one for 2021 that will not only help you get ahead of debts but save money, too. Try to set a realistic budget, one that really takes into account your lifestyle and needs, as well as income.
Pay Off Holiday Debt
If you did amass holiday debt, you want to pay that debt down as quickly as you can, so you don’t start off behind in the New Year. Paying more than the minimum balance as often as you can will help bring that holiday debt down quickly. If possible, look for credit card offers that allow for no-interest balance transfers or a lower percentage rate than your existing card.
Plan Ahead for the 2021 Holidays
To make sure you don’t find yourself in the same situation at the end of this year again, consider putting money aside ahead of time every month into a holiday savings account just for that. Then, you’ll have an automatic budget for your holiday spending in 2021, sitting in an easy to access savings account.